Coal lobby is not being fair dinkum on carbon reduction scheme

Paddy Manning

The coal lobby trots out some fair dinkum-looking blokes in its TV commercials, but that's advertising. The Australian Coal Association, which hopes to blunt the Federal Government's proposed emissions trading scheme with the ad campaign, is not being fair dinkum with the public, either about what the carbon pollution reduction scheme will do to its business, or what the industry is doing to cut greenhouse gas emissions by investing in so-called clean coal technologies.

It is impossible to reconcile the association's doom and gloom with record planned investment in new coal mines and export infrastructure, and expectations that our exports of thermal and metallurgical coal are set to double, rising in volume and price. Its claims that 9000 direct and indirect jobs will be lost if the carbon pollution reduction scheme goes ahead as proposed, and that up to 16 mines will close, are contentious to say the least.

Take the issue of fugitive greenhouse gas emissions from coal mines. With annual CO
2 emissions of 25 million tonnes from "gassy mines", and a forecast carbon price of, say, $20 a tonne, we are talking about an impost of $500 million - easily covered by the assistance already being offered, of $750 million. Turning waste coal mine methane into energy is an opportunity for coal miners anyway, with companies like the unlisted CSM Energy, which partners with AGL, specialising in just that.

Citigroup's analysts this week criticised the coal industry line. While they recognised some impact of the carbon pollution reduction scheme on the profitability and valuation of coal companies, they said ''the scale of the debate may have superseded the scale of valuation impact … we do not see CPRS as a major negative investment for the coal sector at current share prices''.

The association's position on the scheme is pure posturing, and industry executives know it even if they will not say so publicly. One source said Marius Kloppers, chief executive of our biggest coal exporter BHP, recently confided to him that he too thought the lobby group was stretching the facts. Another said it was pointless hoping for any endorsement for the carbon scheme out of the coal industry. "This is the pig-shooting community we're talking about."

The real risk to the coal industry, though it may not believe it, is that the world will make a radical reduction in coal use.

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Assuming carbon pricing is brought in, the federal Opposition spokesman on resources, Ian Macfarlane, told G-BIZ: ''There won't be a domestic market for steaming coal in 20 years' time.'' He used to say God played a joke on Australia, putting the people on the east coast and the gas on the west coast. But with the development of Queensland's vast coal seam gas reserves, the joke is over. Macfarlane was resources minister from 2001 to 2007 and a supporter of clean-coal technology. Australia is now "awash with gas", he says.

Coal-fired power using carbon capture and storage will not play a significant part in Australia's future energy because by the time it is ready - sometime in the 2030s, the Global CCS Institute says - we will have far more cost-effective options.

Using gas in the transition, Macfarlane thinks we will be on to nuclear power by then. Others think renewables could provide ample baseload power by 2030. Only the Federal Government thinks that by 2050 we will be getting a third of our emissions reductions from coal-fired power with carbon capture and storage.

We might, if the coal industry had invested enough to make it work. But is has not. Accounts filed this week showed so far, out of the coal association's $1 billion Coal21 fund, the main vehicle for funding clean coal technologies, only $36.4 million has been spent since it was launched in 2006. Which is the other change Macfarlane has observed: if anything, over the last three to four years, carbon capture and storage has "gone backwards".

Oddly Macfarlane is a supporter of the Government's $2.5 billion carbon capture and storage flagships process, which hopes to part-fund up to four commercial-scale coal-fired power stations, because it will show offshore customers the technology is viable.

For that reason he believes it is ''very much'' the role of the coal miners to invest in carbon capture and storage.

''[Even] $1 billion is not enough for the industry to invest, especially if the taxpayer is investing $2.5 billion,'' he said.

The electricity sector is not investing in carbon capture and storage either. In a sustainability briefing on Thursday AGL conceded just ''several million dollars'' had been spent on clean coal technology at its minority-owned brown-coal fired Loy Yang power station in Victoria.

Apart from running negative advertising and lobbying campaigns, the coal industry has failed to invest in climate-change abatement and is now struggling.

The association is said to have lost about half a dozen people in the past few months, a fair dent in a staff of 15, and there is a push in the resources sector to consolidate representation behind the Minerals Council. ''The industry hasn't committed enough resources at a high enough level to deal with one of the great challenges of the age,'' one industry source said. It's showing.